Microsoft confirms 3DV acquisition

Israeli company 3DV's technology forms the basis of Microsoft's new games product, Project Natal.

It has been a stormy year for software giant Microsoft's R&D center in Israel. For the first time since it was set up three years ago and grew from 130 to 600 employees, it has had to cope with the negative side of rapid growth.

The center laid off 50 workers in January, workers who joined it from Gteko, which Microsoft bought in 2006. Microsoft calls Israel its third strategic development center in the world, outside of the US.

Speakers at the center's annual press conference today preferred, for understandable reasons, to concentrate mainly on the rapid growth side and to give small mention to layoffs. "Fourteen development projects are taking place at the center today, twelve of them completely new and destined to become Microsoft products in new markets," said Moshe Lichtman, Microsoft corporate vice president and head of Israel R&D. The company claims that it is in the process of recruiting new employees.

Alongside new product launches, the company focused in the past year in Israel on the more strategic side too, and Lichtman mentioned the investment in N-Trig that Microsoft led at the beginning of the year, and said, for the first time officially, that "the R&D center helped Microsoft in buying the intellectual property of 3DV Systems, and in the wake of that dozens of the company's employees were recruited to work at the development center." Microsoft's official comment comes a few days after the Antitrust Authority approved the deal. Financial details are not known.

3DV, which develops technology for identifying movement in three dimensions, was in the headlines two weeks ago when, at the E3 games exhibition, Microsoft launched Project Natal, a system that makes it possible to control games through movement and voice alone. It is believed that the system was developed on the basis of technology from Israeli companies 3DV and Prime Sense. Lichtman would not respond specifically about the Israeli center's involvement in developing the system, and said that "when there's something to tell, we'll do so."

Lichtman also announced the expansion of the center's activity to a new area --- online --- beyond dealing in security and telecommunications, the core fields of the local center. The new field will be based on technology that Microsoft acquired from Israeli company YaData eighteen months ago in online advertising, an activity that Microsoft has said in the past that it intends to expand to produce a quarter of its total revenue.

This is the first time that the local center has given any kind of peep at its areas of activity in any detailed way. One of the solutions that the company revealed today that it was developed in Israel was Microsoft Security Essentials, which is to be integrated with the Microsoft 7 operating system, and is intended to provide protection to the private user against Internet-borne threats.

Another product that the company unveiled was SMS Messenger, the first developed by the telecommunications group at the center, and aimed at enabling transparent communication between cellphone users and users of instant messaging programs on personal computers.

The Microsoft Israel Development Center has 15 researchers, and two initiatives left the laboratory to become Microsoft products. According to the center's CTO Yoram Yaacovi, between four and six projects are running simultaneously at the laboratory. "At least two projects have substantial market potential, and could become products that we all use," he said.

Published by Globes [online], Israel business news - www.globes.co.il - on June 22, 2009

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